Manufacturing Expands to Highest Levels in 15 Months, But Jobs Lag and Disappear

For the second straight month in a row, the Manufacturing ISM® Report On Business® shows positive growth in expansion territory. This, after a sharp downturn in April and lagged improvement in May. Now, on the right side of the expansion line, manufacturing continues to put up positive figures across the board, save for employment, which remains in dire contraction territory as the economy weathers COVID-19.

Optimism runs high with this report, as benchmarks trend cautiously in the right direction. New orders rose 5.1 points over June. Imports and exports also rose, 4.3 and 2.8 points respectively, signaling a return to normalcy after massive supply chain disruptions earlier in the year. These figures alone signal that manufacturing’s gears have begun spinning again. Prices, order backlogs, and production all rose; deliveries, inventories, and customers’ inventories fell.

Employment is the anomaly. While employment figures rose in July (up 2.2 points), this metric lags all others by a wide margin and is still firmly in contraction territory, registering 44.3 points on the ISM scale. This marks the 12th straight month of low manufacturing employment numbers.

A dim outlook for job prospects

Stunted employment figures in the ISM could get worse, according to many executives. The sharp and sudden contraction of the manufacturing economy left many furloughed or laid off, and for a significant portion of these workers, their jobs will cease to exist. It’s the nature of rippling effects of COVID-19.

Executives from various sectors of industry — including transportation equipment, furniture, and non-metallic mineral products — have cited a grim prospect for jobs headed into 2021. Summed up by one executive, “many of the plants are on reduced hours and/or furloughs. About 20 percent to 25 percent of plants are scheduled to be consolidated in the next six months to improve margins and profitability.”

Uncertainty continues to loom large

Despite a return to pre-pandemic levels of production and trade, there are ongoing concerns from all corners of manufacturing about uncertain variables in the near future. How will manufacturing fare post-November presidential elections? What disruptions will new aluminum tariffs bring to global trade?

As new uncertainties pile on existing unknowns, manufacturers are taking evasive action. From one executive in the petroleum and coal products sector: “Uncertainty regarding our industry and business has not improved. We are developing the 2021 budget around multiple scenarios.”

And, of course, the United States’ continued struggle with COVID-19 persists. Cases recently topped 5.1 million amidst new outbreaks — many of them in the heart of manufacturing country. Although it’s uncertain how disruptive the pandemic will continue to be for producers, many anticipate a leveling-off of production in the fourth quarter as the virus lingers and seasonal sicknesses bear down.

Optimism for 2020 remains high

Despite unknowns, the raw data of July’s ISM report has many executives optimistic for the back half of 2020. According to a voice in the computer and electronic products sector, “manufacturing outlook has improved greatly in June, as business has resumed at nearly 100 percent. We have implemented a number of safeguards that are costing extra money, but we are running.”

A strong August into September could bring much-needed stability to manufacturing in time for a tumultuous quarter still to come.

As manufacturing stabilizes, companies need to continue their careful planning into the end of 2020. Now’s the time to shore up maintenance and repair logs. You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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